In approving assistance under the enhanced HIPC Initiative for Zambia on December 1, the IMF’s Executive Board agreed to change the rules for the provision of such assistance to allow for accelerated delivery of relief.
In a statement issued following the Board’s decision to approve $602 million in net present value terms as part of a total $3.8 billion package from Zambia’s creditors (IMF News Brief No. 00/111), IMF Deputy Managing Director Shigemitsu Sugisaki said “the new rules permit, under exceptional circumstances such as Zambia’s, for the IMF to accelerate delivery of debt relief. This action was taken to address a hump in Zambia’s total debt-service payments originating from Zambia’s arrears clearance operation to the Fund in 1995.
“In the absence of HIPC assistance,” Sugisaki said, Zambia’s debt service would have more than doubled next year to over $420 million. However, as a result of the IMF Board’s decision today, and coupled with decisions by other creditors under the HIPC framework, it is clear that Zambia’s debt-service payments in each of the next three years will be lower than this year. The IMF will effectively reduce by about two-thirds Zambia’s debt to the IMF.” The total package agreed for Zambia is equivalent to about $2.5 billion in net present value terms, or approximately 63 percent of Zambia’s net present value of debt outstanding at end-1999 after the full use of traditional debt-relief mechanisms.
“The decision by the IMF Executive Board, combined with a substantial increase in net resource transfer to Zambia, will help give the country the resources that will permit a significant increase in social expenditures in real terms, especially to fight AIDS and poverty,” Sugisaki explained. The IMF Board’s decision came into effect after the World Bank’s Executive Board took a similar decision a week later (IMF Press Release No. 00/67, December 8).
Zambia will receive the bulk of the assistance under the enhanced HIPC Initiative when it satisfies a number of conditions, including adoption and implementation of a participatory poverty reduction strategy paper.